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spouse won’t receive any death benefit. But, upon your spouce’s death, your beneficiaries will receive the death benefit.

If you are considering this type of policy, make sure the policy has a provision to split the policy into two separate life plans, one for each of the lives insured, which will cover an amount equal to one- half of the original death benefit. This helps in case of a divorce, fur- ther changes in estate tax law, or changes in your estate situation.


Many of my clients plan on leaving their beneficiaries shares of stock. This is one good way to help your heirs reduce the amount of money they pay in capital gains taxes because of the step-up in basis law. The step-up in basis rule was also affected by the new tax laws that were enacted in 2001, but for most people, it won’t be a big issue.

Under the old rules, any inheritance of stock or another asset would allow the recipient to scoot around the capital gains tax because the original tax basis for the asset would be wiped out. For instance, you inherited 1000 shares of XYZ stock from your father. He originally paid $10 per share (or $10,000). When you inherit the stock, it is worth $90,000. Had your father sold the stock, he would have been taxed on the gain of $80,000 at the long-term capital gains rate of 20 percent. His tax due would have been $16,000. But you inherit the stock instead. Your basis in the stock is the value when he died, or $90,000. If you were to sell the stock for $90,000, you wouldn’t have to pay any capital gains tax. But if you were to wait, and you sold the stock when it was worth $95,000, you would be taxed on the gain of $5000.

Father’s tax basis for 1000 shares Value of stock at father’s death Your tax basis in stock Sell stock for $90,000 Sell stock for $95,000

  • $10,000

  • $90,000

  • $90,000

  • no tax due

  • tax due on $5000 gain

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